Abstract: Corporate digitalization offers new possibilities for innovation in the digital age. Existing studies have generally found that corporate digitalization can enable innovation. However, there are two research gaps to be addressed in previous literature. First, most of research has been conducted in the context of established firms, arguing that resources and capabilities possessed by established firms can help to realize the innovation potential of digitalization. Although few studies have focused on entrepreneurial firms, they only see the advantages and overlook the disadvantages enjoyed by entrepreneurial firms in harnessing the innovation benefits of digitalization. Second, previous literature has adopted a technology-oriented approach, which contends that some characteristics of digital technologies can facilitate firms to innovate. Unfortunately, this approach has ignored that digital transformation is not only a technology matter, but also a management issue which needs managers to update cognitions and skills as well as the fit between technology and environment. Taking sociotechnical system theory as the theoretical framework, this study aims to investigate the influence of corporate digitalization on innovation performance, as well as the boundary conditions of this relationship in the context of entrepreneurial firms. Specifically, based on the four unique characteristics of entrepreneurial firms compared with established firms, this study proposes an inverted U-shaped relationship between corporate digitalization and innovation performance, as digitalization fosters knowledge generation and hinders knowledge integration. Moreover, this study investigates the moderating effect of TMT skill diversity, which is argued to flatten the inverted U-shaped relationship by easing the knowledge integration dilemma. This study investigates the moderating effect of industry competition as well. Industry competition is expected to steepen the inverted U-shaped relationship by both enhancing knowledge generation and easing the knowledge integration dilemma. This study analyzes data collected from 224 Chinese entrepreneurial firms to test hypotheses. The results show that there is an inverted U-shaped relationship between corporate digitalization and innovation performance. A top management team with balanced digital and non-digital skills flattens the inverted U-shaped relationship between corporate digitalization and innovation performance, while high level of industry competition steepens this inverted U-shaped relationship. Therefore, the findings of this study on the one hand offer new understanding of the relationship between corporate digitalization and innovation performance in the context of entrepreneurial firms, by taking the unique characteristics of entrepreneurial firms into account. On the other hand, this study demonstrates how organizational social system (i.e., the human and industrial factors relevant to organizations) can affect the innovation effect of corporate digitalization, advancing the research on the boundary conditions of digitalization that can enable innovation.